From a viewpoint of fairness and the amazing self-interest displayed by a former public servant supposedly dedicated to the education of children, Arlene Ackerman’s decision to seek state unemployment benefits after receiving a $900,000.00 severance package leaves one wondering whether there is anyone left in the Philadelphia School District who is not looking out for themselves. Yet, from a legal viewpoint, there is nothing improper with Ms. Ackerman’s request. The fault must lie with the attorney for the City of Philadelphia who negotiated the severance agreement and did not preclude Ms. Ackerman from claiming any further benefits on top of the generous severance.
An employment severance agreement is simply a contract. The parties are free to negotiate the terms and conditions and enter into a bargain they find mutually acceptable. Typically, the employee gives up the right to sue the employer for any reason in exchange for compensation which may include money, extended healthcare benefits, retraining, and whatever else the employee’s attorney is skillful enough to wrangle for the client.
Until a new law known as Act 6 of 2011 takes effect in Pennsylvania on January 1, 2012, it has been perfectly legal for employees to negotiate severance packages in which they reserved the right to apply for unemployment benefits and the employer agreed not to contest. In these circumstances, the employee often received more money for the duration of the severance period than if the person remained employed. In Ms. Ackerman’s case, her departure from the Philadelphia School District does not appear to have been strictly voluntary. One’s acceptance of a severance package in lieu of termination does not turn a firing into a voluntary quit under the unemployment laws. Accordingly, she may well qualify for the maximum amount of unemployment benefits given her six figure salary. Having paid unemployment taxes to the State of Pennsylvania during her employment, one can also argue she is simply taking back what she already put in.
Starting in January 2012, someone who becomes unemployed and receives a severance package will now have the severance pay deducted from their unemployment benefits “to the extent the severance pay exceeds forty percent (40%) of the state average annual wage.” In Ms. Ackerman’s case, it is unlikely she would have been eligible for unemployment benefits under the new law.